Category Archives: Insolvency Bill

The new Irish Personal Insolvency Laws have introduced something called a Debt Relief Notice. The Debt Relief Notice process is like a simplified bankruptcy. It allows for the write off of up to €20,000 of debt after 3 years .

Debt Relief Notices are only for debts of €20,000 or less and only for people who have no income and no assets, are insolvent and have no realistic prospect of paying their debts within the following five years. In particular, this will be of relevance to those who do not own their home.

Who qualifies for a Debt Relief Notice

You may be eligible for a Debt Relief Notice if ..

a) your net monthly disposable income is €60 or less. (Your disposable income is your income after deductions for reasonable living expenses and payments to cover debts that are excluded from this process) . All income, with the exception of Child Benefit, is taken into account.

AND

b) The total value of your assets is €400 or less. Assets include savings, shares and property.
Assets do not include:

· Essential household equipment and appliances

· Books, tools or equipment needed for employment or business

· One motor vehicle up to a value of €1,200 or a vehicle that is specially adapted for you as a person with a disability

The Debt Relief Notice covers most types of debt, for example, debts arising from credit cards, overdrafts, personal loans and utility bills. If you owe money because of a hire purchase agreement, you must give up possession of the relevant goods. The outstanding amount can then be treated as a qualifying debt for the purposes of a Debt Relief Notice.

The following debts are excluded from the process:

· Debts under family law orders – for example, maintenance orders for spouses and children

· Taxes, duties or levies owed to the State including the Household Charge and rates

· Money owed to the Health Service Executive (HSE) under the Nursing Homes Support Scheme

· Debts due to owners’ management companies in respect of annual service charges for multi-unit developments

· Debts due under court awards for personal injuries or death

· Debts arising from a loan (or forbearance of a loan – an arrangement to postpone or otherwise rearrange payments) obtained through fraud or similar wrongdoing

Who is not eligible

You will not be able to get a Debt Relief Notice if:

· You have already had one

· You have applied for a protective certificate in the previous 12 months

· You are currently a party to a Debt Settlement Arrangement or a Personal Insolvency Arrangement or you have successfully completed such an arrangement within the previous five years

· You are involved in bankruptcy proceedings, you are an undischarged bankrupt or you have been discharged from bankruptcy in the previous five years

· You incurred 25% or more of the debts in the six months before you applied

· In the previous two years, you have entered into any transaction at an undervalue or given a preference to any person (where you have intentionally done something to put one creditor in a better position than others)

Approved intermediaries

You may apply for a Debt Relief Notice only through an approved intermediary (the Insolvency Service are going to decide who will be approved intermediaries.) The Money Advice and Budgeting Service (MABS) will be an approved intermediary .

Approved intermediaries may not charge you any fees for their services but the Insolvency Service may give them a grant out of the fees that it collects for its services.

Approved intermediaries will not be liable for damages resulting from their actions unless there is bad faith involved – in effect, the usual rules about professional negligence will not apply to them.

You must disclose all details of your financial affairs to the approved intermediary. The intermediary will then advise you whether or not you meet the conditions for a Debt Relief Notice, the consequences of getting such a notice, the alternative options that may be available to you, and the fees (if any) that you may incur in the process. If you decide to proceed, you must confirm this intention in writing.

The intermediary will help you to complete a Prescribed Financial Statement and will process the application if they consider that:

· The information in your statement is complete and accurate

· You meet the conditions for eligibility

· It is appropriate for you to apply for a Debt Relief Notice (note that appropriate means that there is a reasonable prospect that getting such a notice would facilitate you becoming solvent within five years)

If the intermediary is satisfied about all of this, they will issue a statement to that effect.

The application is then made to the Insolvency Service. The application must include all the details of your financial affairs and your debts. If the Insolvency Service considers that the application is in order, it will issue a certificate to that effect and notify the Circuit Court. The Circuit Court will then review the application and documentation and, if satisfied that the conditions are met, will issue a Debt Relief Notice.

The Court will notify the Insolvency Service, the approved intermediary, you and the relevant creditor(s) of the notice. The notice will relate to specific debts and specific creditors; you may well have other debts that are not covered by it and those creditors are not affected by it. The Insolvency Service will put details of the notice on its Register of Debt Relief Notices.

Supervision period

If you get a Debt Relief Notice, you will be subject to supervision for three years. This period may be extended by the court in certain circumstances.

During the supervision period, the creditor(s) will not be allowed to pursue any action against you for the recovery of the debt. If the debt was guaranteed by another person, the creditor may take action against that person.

During the supervision period, you will be obliged to tell the Insolvency Service of any change in your circumstances, for example, any increases in income, assets or liabilities. If you receive a gift worth €500 or more, you must surrender half of it to the Insolvency Service. If your net income (after tax, PRSI and Universal Social Charge) increases by more than €250 a month, you must surrender half of that increase as well. If you manage to surrender half of the total debts covered by the Debt Relief Notice, then you no longer have to surrender any further money. You may not get credit of €650 or more from any source without informing that source that you have a Debt Relief Notice.

At the end of the 3 year supervision period – the Debt Relief Notice ends and you are discharged from the debts and any interest or penalties on those debts. Your name is then removed from the register and you are given a Debt Relief Certificate

A new group of “specialist judges” will be appointed to deal with all the insolvency actions due to come before the courts.These specialist judges will receive the same salaries as newly appointed Circuit Court judges, will be regarded as full judges and must be addressed in court as “judge”.

The Judges will be chosen from county registrars who will have to apply for the €140,623-a-year roles .

County registrars perform a number of quasi-judicial functions – for example holding motions courts and case progression hearings, conducting arbitrations under the Landlord and Tenant (Ground Rents) Acts and the taxation of costs. In addition, the county registrar has responsibility for the administration and management of the circuit court offices in each county.

New Insolvency laws are due to come into force in Ireland in 2013
One feature of the new rules is a Personal Insolvency Arrangement.

If you have a mixture of secured and unsecured debts that you cannot repay – you may be able to enter into a Personal Insolvency Arrangement or PIA.
Unsecured debts are those such as credit card, personal loans, overdrafts etc. Mortgages are secured debts – these might be on your own principal private residence or on a buy-to-let or investment property.

A PIA is for people with debts between €20,000 and €3,000,000 who are insolvent and it is unforeseeable that over the course of a 5 year period they will become solvent

(If you are insolvent it means you are unable to pay your debts in full as they fall due.)

A personal Insolvency Arrangement will provide a mechanism for debt settlement and restructuring if you are insolvent but have the means to make part payments of your debts over a period of years.

An application for a Personal Insolvency Arrangement has to be made via a personal insolvency practitioner (PIP) . They will complete a standard financial statement with you setting out your financial affairs in full. The personal insolvency trustee will advise you about your options and will assess whether you meet the eligibility criteria for a PIA. Those criteria include the following:

· You must be “cash-flow” insolvent (i.e. unable to meet your debts in full as they fall due);

· it is unforeseeable that over the course of a five year period, you will become solvent;

· a debt settlement arrangement (DSA) would not be a viable alternative to a PIA as a mechanism to make you solvent within a period of five years.

If the personal insolvency practitioner is satisfied that you meet the above eligibility criteria and is satisfied that there is a reasonable possibility that a PIA would be capable of making you solvent within six years, the personal insolvency trustee applies to the Insolvency Service for a protective certificate.
The Insolvency Service carries out certain checks in relation to the application and issues a protective certificate which protects you from action by your creditors for a minimum of 40 working days (and up to a maximum of [60] working days, subject to extension for a further [10] working days).

The personal insolvency trustee notifies your creditors and sends them prescribed information, including information about your financial situation.
The personal insolvency trustee considers any submissions from creditors and prepares a proposal for a PIA, taking into account what you can afford to pay to your creditors while leaving you with sufficient income to maintain a reasonable standard of living.

The PIA can include things such as writing down mortgage debts , writing down unsecured debts. You cannot be forced to sell your home as part of the arrangement.

If you consent to the proposal – the PIP then summons a creditors’ meeting to vote on the proposal. In considering whether to vote in favour of the proposal, the creditors take into account whether the financial outcome for them under the PIA is likely to be better than the estimated financial outcome for them in alternative scenarios such as enforcement or bankruptcy.

The arrangement is accepted if creditors representing 65% of the value of the total debt (secured and unsecured) vote in favour and if more than 50% of the secured creditors and 50% of the unsecured creditors vote in favour.

If your financial circumstances improve over the course of the PIA you are obliged to notify the PIP and the terms of the PIA may be varied to provide for increased payments to the creditors.

If you don’t abide by the terms of the PIA (e.g. there is a 6 month arrears default in making the payments due under the PIA) the arrangement will fail and you will again be liable in full for the debts. The creditors can then take enforcement action against you or petition for your bankruptcy.

If you successfully complete the PIA, all of your unsecured debts are discharged. You will remain liable to pay the mortgage in respect of his principal private residence on the restructured terms agreed under the PIA.

Alan Shatter T.D, Minister for Justice, Equality and Defence, has announced the commencement of recruitment of some of the specialist staff required by the Insolvency Service of Ireland (ISI).

U up to 80 staff, including some specialist staff, may be required initially for the Service itself. It is expected that they will be mainly sourced through redeployment from other areas within the public service.

Arrangements are also being made for the transfer of the functions, in regard to the administration of bankruptcy currently carried out by the Courts Service to the new Insolvency Service.

A number of specialist staff will be required, on either short and long-term contracts. To start this process, and to ensure that the Service will be in a position to discharge its functions early in 2013, the Government has agreed that a recruitment process for a number of accountants and an in-house solicitor, should commence immediately.

Where suitable staff cannot be sourced from redeployment from across the public sector, they will be recruited through an open process organised by the Public Appointments Service.

Considerable emphasis is being placed on developing the Information and Communications Technology aspects of the new Service, with priority attention being devoted to the design and development of the necessary case management, financial management and management information systems. The process of identifying and securing an appropriate office premises for the new Service is also underway.

Minister Shatter said ““I am keen that the new Insolvency Service will be in a position to open for business as soon as possible after the necessary legislation is passed by the Oireachtas. This approval by Government of the staffing resources necessary is a key step and I look forward to speedy progress over the coming months.”

A Personal Insolvency Seminar is being held at the Harbour Hotel Galway on October 24th 2012.

Speakers: Barry O’Neill, Aengus Burns

Presenter: Chartered Accountants Western Society

CPD Hours: 2

Cost: €40.00 (£31.76)

Wednesday, October 24, 2012 6pm to 8pm

The recently published Personal Insolvency Bill is one of the most significant pieces of legislation introduced in Ireland in recent years.

The key features of the Bill are the introduction of new non-judicial debt settlement systems and the proposal that the period of bankruptcy be reduced from 12 years to 3 years.

It is expected that the Bill will radically reform our existing insolvency legislation. It provides for different forms of debt relief for the borrower, depending on the nature and amount of the debt. It also includes a new Scheme of Personal Insolvency, which it is hoped will be a key step in addressing the mortgage arrears crisis and help rebalance the rights of the borrower and lender in a fairer manner.

The Minister for Justice and Equality, Mr Alan Shatter, T.D., today announced that he has appointed Mr Lorcan O’Connor to be the Director-designate of the Insolvency Service of Ireland. He will take up his post on 22 October, 2012.

The salary for the position of Director-designate of the Insolvency Service of Ireland is as follows – €127,796 – €133,605 – €139,898 – €146,191

The Insolvency Service of Ireland (ISI) is a statutory body which will be set up to under the Personal Insolvency Bill . It is expected that the Report and Final Stage will be completed in the Dáil in October.

The ISI will be responsible for all matters concerning personal insolvency, both judicial and non-judicial. Its main functions will be to provide and manage the processes necessary for the efficient operation of the new non-judicial debt settlement procedures being developed under the legislation; to determine applications for debt relief under the proposed Debt Relief Certificate process; to further develop insolvency policy and legislation; to develop guidelines for insolvency procedures; to provide necessary information to both the public and practitioners; and to develop and maintain appropriate statistics in regard to insolvency.

Mr O’Connor is a Chartered Accountant and Business & Legal Studies graduate of UCD. He has almost 15 years’ experience in the area of insolvency. He is a Council member and Treasurer of the Irish Society of Insolvency Practitioners. Between 2006 and 2008 he was seconded to the Department of Transport as the Department’s Financial Adviser.

Minister Shatter said, “I am delighted that Lorcan has accepted the appointment. As Director he will be the key driver of the delivery of the reform and will be required to bring together all of the critical elements – legislative and organisational – so as to ensure coherence in the ultimate development of the Service. He brings to the position a wealth of experience that equips him ideally for the many challenges that lie ahead.”

THE PERSONAL Insolvency Bill, will be published by the end of June 2012 according to Minister for Justice Alan Shatter .

Mr Shatter also said he hoped the Legal Services Regulation Bill would be enacted by the end of the year.

He said he hoped the Bill, when enacted, would encourage financial institutions to engage with people in debt in a realistic manner, without having to have recourse to the measures that would be contained in the Bill.